It can be disclosed that the passport is being held by the district attorney's office in the country's capital, Santo Domingo, following a dispute over an oil deal. Bank accounts in the name of Nally have also been frozen.

The Guardian revealed last weekend that Brown had been hiding under his false name in Punta Cana, a resort in the east of the Dominican Republic.

It means his options, as a man on the run from Britain and in need of a useable passport, have been curtailed. He cannot easily move to another country without it.

Police are urgently seeking ways to bring Brown back to Britain, but their task is complicated because there is no extradition treaty between the two countries.

The Liberal Democrats are continuing to refuse demands that they should return Brown's gift, given by Brown's company 5th Avenue Partners in the weeks before the 2005 general election. British courts were told that his company was wholly fraudulent and the gift was given to convince victims that he was a legitimate businessman.

Brown's false passport is being held because of a dispute with another company over an oil deal.

He established a company called Van Der Lay Holdings in November 2008 in the Dominican Republic, using the name of Nally.

This company then approached a Dominican Republic-based company to buy into a deal to import hundreds of thousands of barrels of oil.

According to documents, Brown, using the name Nally, guaranteed to supply 4,820 tonnes of oil.

However, after hundreds of thousands of dollars were handed to Van Der Lay, the deal never took place.

Last year, the Dominican company took Brown to court. As a result, his bank accounts were frozen and in February he was sent to prison for three months while an investigation into the deal took place.

Brown was freed in May after signing a guarantee that he would repay $318,000 (£201,000). So far, $104,000 has been repaid but the rest is outstanding and Brown is behind on his repayments. The Dominican authorities also froze some of Brown's bank accounts in connection with the case. It is not known whether the block on these accounts was ever lifted.

This week, City of London police, the Serious Organised Crime Agency, the Home Office and Dominican Republic officials have held discussions over whether Brown will be repatriated to Britain. The Dominican Republic does not have an extradition treaty with the UK.

Police are also investigating claims that Brown has access to other false identities.

Officials are concerned he may be able to move across the Dominican Republic's porous border into Haiti and on from there.

The freezing of his accounts will also have given him great problems. Former friends claim Brown has found it increasingly difficult to move money into and out of the Dominican Republic.

Two men were arrested on Monday in connection with Brown and his false passport.